STEVE
USDIN: The Medicare drug benefit is popular and consistently under budget. So
why does the Obama administration want fundamental changes? And what will those
changes mean for seniors? I'm Steve Usdin. Welcome to BioCentury This Week.

NARRATOR:
Connecting patients, scientists, innovators, and policymakers to the future of
medicine -- BioCentury This Week.

STEVE
USDIN: Medicare Part D, the prescription drug benefit, is one of the few
government entitlement programs that enjoys broad bipartisan support. Seniors
like it. Politicians like it. And it consistently comes in under budget.

So
why is the Centers for Medicare and Medicaid Services planning fundamental
changes that would cut the number of competing plans in half and eliminate the
requirement to provide virtually all drugs for depression and
immunosuppressants for transplants? Both Democrats and Republicans on Capitol
Hill are demanding answers, like Pennsylvania Republican Joe Pitts, chair of
the House Energy and Commerce Committee's Health Subcommittee.

JOE
PITTS: I'm at a loss to understand why CMS has proposed these changes and what
problems with the Part D drug benefit it is attempting to solve. I don't see
how any of these proposals provide tangible benefits to seniors.

JONATHAN
BLUM: CMS's proposed rule is a consistent path for us to simplify plan choices,
to reduce extra plans being offered by the same plan sponsors.

STEVE
USDIN: Community and pharmacy trade groups are standing behind CMS. Patient
medical groups, managed care pharmacies, and drug industry trade associations
are united in opposition. CMS is reviewing a flood of comments that were submitted
just ahead of the March 7 deadline. Today, we're going to talk about protected
drug classes and limiting the number of competing plans with Andrew Sperling,
an advocate for patients with mental illnesses, and with health policy analyst,
Chris Holt.

We'll
start with another controversial CMS proposal, changing the way seniors access
drugs at the pharmacy. To discuss the pharmacy issues, I'm pleased to be joined
by Douglas Hoey, CEO of the National Community Pharmacists Association, and
Edith Rosato, CEO of the Academy of Managed Care Pharmacy. Doug, can you
explain a little bit, what is the change, and why do you favor it?

DOUGLAS
HOEY: The change would result in preferred networks. There's actually several
changes in the proposed rule. But one of the biggest ones that's important to
community pharmacists and patients that we serve has to do with preferred
networks. So right now, seniors are limited as to which pharmacies they can go
to for their medications. They can go to any pharmacy they want, but if they go
to certain pharmacies, they'll pay more.

Our
members, we are concerned that we don't have a chance to be offered the same
contracts as some of the big box stores. And so our position is supportive of
CMS in this particular regard, in that seniors should have the choice of being
able to go to any pharmacy they want. And they should be able to choose which
plan that they use with those pharmacies.

STEVE
USDIN: So Edith, what's wrong with that?

EDITH
ROSATO: Well, the way that the proposed rule and the way that Medicare Part D
is outlined patients can access their prescription drugs at any pharmacy. They
don't necessarily have to go to a preferred network pharmacy. The trade-off is
that they'll pay a little bit more with regard to their premium to go to an outside
of a network pharmacy.

But
then the bottom line is that CMS and Medicare Part D has been a very, very
successful program. If you take a look at the numbers, there's been
considerable savings using a preferred network pharmacy. In fact, over the next
10 years, we're scheduled to see about $6.3 billion in savings just by using
preferred network pharmacies.

DOUGLAS
HOEY: If I may, we disagree with that particular contention. In fact, our
analysis has shown, and CMS's analysis has also shown that preferred networks
are actually more expensive in many cases, not in every instance, but in many
cases, the non-preferred networks. And in fact, CMS has a responsibility, not
just responsibility by law not to allow preferred networks if they're costing
the government more.

So
we've gone through Plan Finder, doing our own analysis. In fact, we did one
just recently. Nine out of the 13 different plans that we checked using a
common market basket of drugs were more expensive using preferred networks then
using the non-preferred pharmacies.

STEVE
USDIN: I want to give Edith a chance to respond to that. First, I want to
clarify a little bit, so people understand what the preferred network is. And
basically, as I understand it, that's a contract between the plan provider and
a pharmacy. And they say, if you go to these particular pharmacies that are
preferred, you'll get the drugs cheaper, you'll have a smaller copay or
something like that.

And
then there's a kind of a deal that the plans have with the pharmacies. Is that
roughly what it is?

EDITH
ROSATO: Yes, it's a contractual agreement between the managed care organization
and either the community pharmacy or the mail order facility. And one of the
important things we have to keep in mind is that we want patients to have
choice, so they can either go to their community pharmacy, they can go to a
chain pharmacy, or a mail order facility. The contract provides the provider
has to meet certain requirements to be able to contract with a managed care
organization.

And
we call them standards of care. A lot of the standards of care are wrapped
around quality and also affordability. So the bottom line is, what we're trying
to do is, we're trying to make it very cost effective for seniors to get their
prescription drugs, to have a robust enough network that they can access their
prescription drugs in a variety of ways and have that choice, and in addition
to that, make sure that the quality of care is there for the seniors.

STEVE
USDIN: From the point of view of the seniors, I can understand the community
pharmacies, obviously they don't want to get squeezed out or disadvantaged
here. From the point of view of the Medicare beneficiaries, what's the
difference?

DOUGLAS
HOEY: One difference is, it's costing them more money. And again, the plan
finder analysis shows it's more costly to go to these preferred networks, not
only for the government, but also for seniors. And again, I'll emphasize it's
not in every single analysis that's been done, but in several.

STEVE
USDIN: We have to agree that you disagree about that.

EDITH
ROSATO: I do disagree, because in the analysis that we've seen, actually, the
premiums for seniors is, on the average, 21% lower in a preferred network than
it is for a non-preferred network. And the bottom line is, the numbers tell the
story. If we we're able to save CMS and if we're able to save beneficiaries and
taxpayers money in the Medicare Part D program, which we have.

If
you take a look at the Kaiser Family Foundation, they actually did a study in
2012 that showed that the CMS Part D program is coming in at 45% less than what
the CBO estimates were.

STEVE
USDIN: Everybody agrees on that. But there's a contention between the two of
you. And we're going to resolve it today, over whether preferred networks save
money or not.

DOUGLAS
HOEY: Just think how much they would've saved if they hadn't used preferred
networks.

STEVE
USDIN: We're going to come back and talk about that just a moment. First,
Representative Marsha Blackburn and CMS official Jonathan Blum had this
exchange about the administration's proposal to reduce the number of Part D
plans. More in a moment.

MARSHA
BLACKBURN: What would you say to the seniors in my district who like the plan
that they have but cannot keep it if you get your way?

JONATHAN
BLUM: First is, that CMS, since 2009, has put in place a strategy to reduce the
number of extra plans that sponsors provide.

NARRATOR:
You're watching BioCentury This Week.

SEGMENT 2

STEVE
USDIN: We're talking with Douglas Hoey and Edith Rosato, discussing the Obama
administration's proposals to change the Medicare Part D drug benefit. Edith,
one of the things that some of the members of Congress said at a recent hearing
was that even if this was a good idea, even ones who supported it, said that
they thought it might not even be legal for a CMS to do that. What's your view
on that?

EDITH
ROSATO: That's correct. Actually, the whole spirit of the Medicare Part D
program that Congress intended was that it would open up to a competitive
marketplace so that there was the ability to negotiate and to increase
competition among the marketplace to be able to drive costs down and also
improve the quality of care. So our members do believe that it is a violation of
the intent of Congress and that the government will not solve the issues. If
there are issues at hand, they really should let the marketplace come to the
table with CMS to figure out how we can improve upon this program that's
already very successful.

STEVE
USDIN: Doug, your view on the legality of CMS stepping in and saying that
community pharmacists have to be treated equally to the big box chains,
essentially and the preferred networks.

DOUGLAS
HOEY: Really, a couple things. On the non-interference clause, the original
intention of that, in our view, was to prevent the government from negotiating
with pharmaceutical manufacturers for rebates. That was the main intention. And
in fact, there's different interpretations when you look at the law as to whether
or not it applies to pharmacies and plans.

But
even setting aside the non-interference clause, you could almost ignore that
and say that CMS right now is in violation of the Social Security Act, because
preferred networks are only allowed if they cost less than non-preferred
pharmacies. And we have evidence as well as CMS has evidence, case after case
after case where the preferred networks are costing Medicare more money and
they're costing the consumer more money.

So
set aside the non-interference argument. And just look at the Social Security
Act. And they're in violation of that. So CMS has to decide if they continue to
be in violation of the Social Security Act or if they pursue the
non-interference clause.

STEVE
USDIN: So both of you say that the law is on your side. I'm wondering if you
lose -- and one side is going to win, one side is going to lose when CMS acts --
are either of you prepared to take CMS to court over it?

EDITH
ROSATO: Well, I would say, first of all, we're kind of looking into the future
thinking what's going to happen. And I would say that with the support of the
Senate Finance Committee members who also issued a letter to Marilyn Tavenner,
who's the CMS administrator, asking for withdrawal of the proposed rule. I
think that would be the next step.

Certainly,
there's enough groundswell support to ask CMS to withdraw the rule as it is
currently and to allow stakeholders to come to the table and figure this out
together.

STEVE
USDIN: I want to switch to another topic for another couple minutes that we've
got here, which is protected classes. I was interested, your organization was
one of the very few that's come out in favor of what CMS has done there and
said that you favor abolishing protected classes for anti-depressants and
immunosuppressants for transplants. Why is that?

EDITH
ROSATO: Well, that's because what we're trying to do, ultimately is, we're
trying to use the evidence that we'd look at the evidence for clinical trials,
medical information. And when we develop formularies, we determine that the
best drug for that should be on the formulary is the safest, most effective,
and the highest quality for patients.

So
we are in favor of disbanding that and allowing these three protected classes
that any drug would be paid for in those categories.

STEVE
USDIN: Scrapping it for the three others. And Doug, what's your view on the
protected classes?

DOUGLAS
HOEY: Protected classes, we really have not taken a strong stand on. We do
think that if CMS is going to go forward with the protected classes, that they
do need to be very cautious in how they implement it, because obviously,
patients have to have access to these very critical drugs. But we have not
taken a strong stand on that. I would say, though, that the groundswell of
emotion around the whole proposed rule, the protected classes is the lightning
rod.

CMS,
makes changes to the Medicare Part D every single year. They tweak it. They
make it better. They improve it. And if protected classes wasn't thrown into
this category --

STEVE
USDIN: We wouldn't be having a show today.

DOUGLAS
HOEY: We probably wouldn't be here today.

STEVE
USDIN: Thanks a lot. That's a good set up, because we're going to be talking
about protected classes next with Andrew Sperling of the National Alliance on
Mental Illness and Chris Holt from the American Action Forum. First, here's
Representative Waxman quizzing CMS about eliminating protected drug classes.

HENRY
WAXMAN: I take seriously the concerns that have been expressed by patients that
removing drugs from the protected classes list will mean that Part D plans may
not cover them. And seniors will not be able to get the drugs they need. Give
us or your rationale here.

JONATHAN
BLUM: The Part D program has many protections built into place -- the appeal
systems, transition policy, the very rigorous formulary review that we do.

SEGMENT 3

NARRATOR:
Now, back to BioCentury This Week.

STEVE
USDIN: We're continuing the conversation about the Obama administration's plans
to change Medicare Part D. I'm joined now by Chris Holt of the American Action
Forum, and the National Alliance on Mental Illness's Andrew Sperling.

What
are the protected classes, and why is it important, in your view, to keep them
protected?

ANDREW
SPERLING: So back in 2006, when the Medicare Part D program was initiated, CMS,
at the time, made the decision that there were six therapeutic categories where
they needed an extra protection for patients to make sure that they could
access the medications their physician prescribed for them.

And
they segregated immunosuppressants, antiretrovirals, antineoplastics,
anticonvulsants, antipsychotics, and antidepressants, and told the Part D plans
that you need to include on your preferred drug list, your formularies, all or
substantially all of those, were the actual words, all or substantially all of
the medications in those therapeutic classes, to make sure that particularly
for low income, what we call dual- eligible beneficiaries, who are concurrently
eligible for Medicare and Medicaid, when they transitioned into the program in
January, 2006, to make sure that all the drugs their physicians have been
prescribing to them will be covered on those preferred drug lists.

STEVE
USDIN: So that transition provision, that's one of the things that CMS says.
They say, well, that transition's long over, and they contend that it would be
OK to eliminate the protection for antidepressants, for immunosuppressants, and
perhaps for antipsychotics. Why do you think that that would be a problem?

ANDREW
SPERLING: Well, first of all, we know that there are new patients that come
into the program every year. Because they turn age 65, and then non-elderly
people with disabilities that qualify for the program that are likely been living
with a particular chronic condition, whether it's schizophrenia, whether it's
kidney disease, whatever that chronic condition is. And they need access to the
medications that they need for their ongoing treatment.

So
we have new beneficiaries that come into the program. And then to remove that
protection for those that already have it would allow a plan to engage in
therapeutic substitution, taking patients that are stable on a particular
medication for a complicated illness, with likely medical comorbidities, you
want to make sure that that treatment is consistent and that all the drugs that
they're prescribed are available on the formulary.

STEVE
USDIN: So Chris, from an economic standpoint, CMS says that they might save as
much as $720 million over five years by eliminating the protected classes. They
contend that there's over utilization as a result of protected classes. Do the
numbers add up?

CHRIS
HOLT: So CMS thinks about half of their projected savings come from this
portion of the rule. What they're not -- they're taking a very, very siloed
approach. And they're looking purely at what happens to their costs if they get
rid of the protected classes. They're not looking at the impact on the parts of
the Medicare program.

So
just last week, there was a study that came out from MBER that has made quite a
bit of news. And one of the things that they found is that Part D has saved
about 8% -- reduced costs by about 8% in other parts of the Medicare program,
particularly the part B hospitalization.

STEVE
USDIN: So people take their drugs and they don't go to --

CHRIS
HOLT: Exactly. So they're not accounting for potential increases in other parts
of Medicare.

STEVE
USDIN: So what you're suggesting is that if patients aren't able to get the access
to the drugs that they need and the protected classes, that they might end up
actually going to the hospital and costing Medicare --

CHRIS
HOLT: Right. CMS needs to do a much more comprehensive cost analysis of this
proposal.

STEVE
USDIN: So one of the other things that CMS says is, well, there's an exception
process. If there's a drug that a patient really needs, that within seven days
their physician can make a request and they can get it through their plan. What
would be your response to that?

ANDREW
SPERLING: Well, first of all, that's a very complicated process. We don't have
a lot of data on the initial stages of the appeals that are done internally to
the plan, in terms of how that's working now. And we have the six protected
classes in place, so we don't have that system overwhelmed with applications
for exceptions and appeals.

That
system would be overwhelmed if suddenly not thousands, but typically more than
a million Medicare beneficiaries suddenly needed to access that exceptions process,
it would overwhelm it. So we believe that's insufficient to provide the
protection that's now in place in these six protected classes.

STEVE
USDIN: And very quickly, the other contention CMS makes is that -- for example,
for antidepressants, there are about 30 drugs that are approved. They say
basically, they're all the same. It doesn't matter which one you get.

ANDREW
SPERLING: Well, we have numerous studies demonstrating that these drugs vary in
both their mechanism of action, in terms of neurochemistry, but especially in
terms of the side effect profile associated with each of these individual
compounds. And those side effects can be severe, in some cases, and could lead
to non-adherence. And that's something that we don't want. When someone's trying
to manage a serious condition like depression, they need to be able to adhere
to that treatment. And when they are switched to a medication with a different
side effect profile that they can't tolerate, their ability to adhere to
treatment and avoid hospitalization is at risk.

STEVE
USDIN: This was a massively complicated rule. One of the aspects of the rule
was the expansion of something called medication therapy management, MTM.
What's that about, and what's your position on it?

ANDREW
SPERLING: MTM is designed to be an extra intervention for Medicare patients
that have three or more chronic conditions. They're taking lots of medications.
Not just, say, for depression, but also diabetes and heart disease. And there
are lots of drug-drug interactions. And they're likely being prescribed
medications by two or three, even four physicians.

So
MTM is designed to coordinate that care to figure out which medications work
best and avoid complications through drug-drug interactions. Some of these
programs work.

What's
in the rule is really a massive expansion of this program by lowering the
threshold by which medication therapy management would be mandated for Medicare
beneficiaries.

STEVE
USDIN: And it's lowered the threshold by saying instead of having to have three
chronic conditions, you only have to have two chronic conditions, right?

ANDREW
SPERLING: Exactly. So it brings in, with the Medicare population, it's older
and sicker, it brings in a lot more people. Under this rule, it's projected that
55% of Medicare beneficiaries would be required to participate in medication
therapy management.

Now
MTM can work for some patients. What we don't yet have are really the protocols
and the standards by which these programs should operate. So NAMI has urged in our
comments -- CMS consult with accrediting bodies, like the National Committee
for Quality Assurance or the Pharmacy Care Alliance, to figure out what are the
standards, what credentialing should go on, what outcomes should we demand of
these programs to make sure they're really following what we know works, based
on clinical research, rather than what someone thinks MTM ought to be.

STEVE
USDIN: And Chris, any thoughts about MTM or other aspects of the law -- of the
proposed rule that haven't gotten as much publicity?

CHRIS
HOLT: I think what this brings attention to is the fact that CMS is dealing in
absolutes. There's not a lot of flexibility in this rule. And it's a 700-page
rule. It is massively changing the Part D program. And they're proposing it to
go into effect in October.

I
think CMS needs to take the comment period -- it just closed -- and they need
to review those comments. If they want to do some of this stuff, maybe we
should look at the 2016 plan year.

STEVE
USDIN: So is part of what's happening here that the Obama administration has
only got two of these -- two more of these changes that they can make in
Medicare, and they're trying to jam as many of them in as quickly as possible?

CHRIS
HOLT: It definitely looks like they're trying to rush this through.

STEVE
USDIN: And Andrew, what do you think's going to happen come October? What are
the political ramifications of some of these changes?

ANDREW
SPERLING: Well, we'll see. I'm certainly not much of a political prognosticator.
We hope, from NAMI's perspective, the most important thing is to pull back the
six protected classes proposal to remove the protections for three of those
therapeutic categories. That's the most important thing, in NAMI's view.

STEVE
USDIN: So we're going to switch more to another topic, which is steps that
Medicare has taken to limit the number of plans that can compete in a specific
area, right when we come back.

NARRATOR:
Every month, BioCentury This Week will feature Profiles In Innovation, a
special segment highlighting the stories of innovators whose work is improving
lives and transforming the world of healthcare.

SEGMENT 4

STEVE
USDIN: We're with Andrew Sperling and Chris Holt discussing the Obama
administration's proposed changes for Medicare. Chris, I want to start with
another change which actually is more fundamental maybe than some of these
other ones we've talked about but has gotten less publicity. And that's
limiting the number of plans that a sponsor can offer in a given region. Can
you talk about what that is and why you think it's important?

CHRIS
HOLT: Yeah, so what CMS is proposing doing is narrowing -- they've narrowed
this several times now -- but narrowing from three plans to two plans the total
number of plan options that a provider can offer in a geographic region. The
argument that CMS makes is that seniors are confused. They end up in the wrong
plan.

They
don't know. There's too many choices. Today there are about 23 choices, at
least 23 choices in every geographic region. CMS doesn't think that seniors can
handle that, never mind that CMS has a plan finder on their website, that every
plan provider has services to help people end up in the right plan.

But
let's take a step back and look at why the Part D program has been so
successful. And it's because of the competition that was built in between these
plans in the market and between these plans, and the pharmacies, and the
pharmaceutical manufacturers. My boss, the former CBO director Douglas
Holtz-Eakin, was CBO director at the time and projected that in 2012, the cost
for the Part D program would be $122 billion. In actuality, that came in at $55
billion.

STEVE
USDIN: So Doug Holtz-Eakin was --

CHRIS
HOLT: Was very wrong.

STEVE
USDIN: -- was very wrong.

CHRIS
HOLT: And he's happy to tell you that.

STEVE
USDIN: So Andrew, what does it mean for patients to have limited -- do you
think that this issue of Medicare beneficiaries being confused by the number of
plans is a legitimate one?

ANDREW
SPERLING: In our view it's not. And the reason is because not every Medicare
beneficiary has the full choice of plans available. Those that are low income,
below 135% of the federal poverty level who get what's called a low-income
subsidy or extra help and those that are concurrently or dually eligible for
Medicare and Medicaid, they can't choose any plan they want.

In
order for them to maintain a $0 premium to have Medicare Part D be affordable
to them, they can only pick a plan that's at or below what's called the Regional
Benchmark, essentially the median plan. So they can't pick an expensive plan
because their coverage is so heavily subsidized.

So
since 2007 and again in 2011 when CMS changed the rules to limit the number of
plans below Benchmark that an individual sponsor could bid on, that's dropped
from well over 600 to now less than 200, so essentially a huge drop in the
number of plans available. So the problem with these beneficiaries is the
changes that CMS has already made in terms of limiting the number of plans
available for these low-income beneficiaries has already had some adverse
consequences.

And
many of these beneficiaries have to switch plans every year because their plan
moves above the Benchmark. It's what's called auto reassignment. They're essentially
involuntary moved from one plan to another. We're concerned that this proposal
is going to result in more of these auto reassignments.

And
it can be sometimes difficult for a beneficiary through no fault of their own
is suddenly notified by CMS, your plan is not available to you anymore because
the premium went up. And we're worried that this rule is actually going to
result in more of those reassignments and fewer plans available to low-income
beneficiaries.

STEVE
USDIN: Chris, we've just got a few seconds. Do you think that's -- is that the
way you see it?

CHRIS
HOLT: Yeah, absolutely, I think that could be a real problem.

STEVE
USDIN: And very quickly, what's your prediction? Is CMS going to go ahead with
this rule or are they going to change it?

CHRIS
HOLT: Frankly, this would be very politically damaging for Democrats in October
to have seniors losing their plans. I can't see that the White House wants to
have this fight this year.

STEVE
USDIN: Well, we're going to have another show, maybe in October or whenever it
is, to find out whether you're right about that. That's this week's show. I'd
like to thank my guests, Douglas Hoey, Edith Rosato, Andrew Sperling, and Chris
Holt.

Have
a thought about today's show? Remember, you can tweet about it using the
hashtag #BioCenturyTV. I'm Steve Usdin. I'll see you next week.